The European Commission has voiced concerns after the French government issued a decree last week giving it the power to veto takeovers in sectors seen as "strategic" for France, including the Alstom deal currently being negotiated with General Electric. EurActiv France reports.

The "Alstom decree", passed last by France's Prime Minister, Manuel Valls, gives the government the right to veto foreign investment in French companies.

The decision comes during negotiations to sell part of Alstom, the French-headquartered company which holds interests in the electricity generation and rail transport markets.

The original decree, adopted in 2005, covered activities related to two sectors: defence and security. However it was revised on 14 May to cover three extra strategic sectors: energy, transport and water.

Economic patriotism

In a statement, the French Ministry of Economy and Finance said the new law would ensure French interests are preserved in matters related to public order, security and defence.

From now on, foreign investments in sectors like gas, electricity, transport, water supply, electronic communications and public health, will require prior authorisation from the French Economy Ministry currently headed by Arnaud Montebourg.

The government’s move takes place as Alstom has entered negotiations to sell part of its activities to US conglomerate General Electric. This has caused outrage in the French government, which is openly opposed to the deal and has sought a European partner for Alstom to replace GE. The German company Siemens has shown some interest which the Montebourg considers the lesser of two evils.

Brussels on the look-out

Under the new decree, the French government has effectively become a party in the negotiations. But the European Commission is confused by France's recent actions.

"The goal of protecting strategic interests of each member state, notably related to public order and security, is legitimate and clearly written in the EU treaties," said Michel Barnier, the European Commissioner in charge of the internal market.

"It is within this framework that tens of European countries (the UK and others) took steps on the matter,” Barnier said.

In Brussels however, the French initiative is seen as rushed and ill-timed. "The experience I had at the start of my mandate during an earlier attempt by France [...] is that it took a long time to verify with national authorities conformity to similar initiatives," the commissioner continued.

In the case of the “Alstom decree”, the Commission was only informed one day before the French government published the law in the official journal and did not receive a copy of it beforehand.

According to Brussels, the risk relates to the evaluation of what constitutes a threat to public order or security as well as on the wide range of sectors covered - water, telecommunication, transport, energy and health.

The scope is "so vast that all attempts to buy French companies will be scrutinised by national authorities, which clearly amounts to protectionism," warned Michel Barnier.

Arnaud Montebourg brushed aside those warnings, saying the new decree was in conformity with European law.

"The decree conforms to European law and France's international commitments. Similar measures exist in almost every large European country. Brussels does not do enough to protect the assets of European countries", Montebourg said in an interview in Le Monde newspaper.

"The new measures will be applied selectively and proportionately, taking into account each situation," stated the French Ministry of Finance in a press release, seeking to reassure the Commission.